Nike's new Starter brand performance sneakers debuted at 400 Wal-Mart stores in the US this month. (Associated Press photo)
RUKMINI CALLIMACHI
Associated Press Writer
VANCOUVER, Wash. - To buy a pair of Chanel or Prada heels it would be pointless to go looking at Wal-Mart, such as the one here where you can get almost anything for a bargain.
Nor will you find the Nike swoosh here.
But what customers are finding at over 400 Wal-Mart stores nationwide is a pair of $37.64 Starter sneakers engineered by Nike Inc
The world's largest maker of athletic shoes and clothing bought the Starter brand seven months ago with the specific aim of entering the value channel, and the new shoes started appearing in stores this week.
Consumers purchased about $1.5 billion worth of athletic shoes at discount stores last year - a market Nike has been yearning to tap, but has been unable to do so for fear of jeopardizing the cache of its core brand, said Scott Olivet, senior vice president of Nike subsidiaries and new business development.
"Nike's positioning is really as a premium performance brand," said Olivet. "And what you always worry about with a brand is extending it too far."
Doing so is risky business, said Olivet, pointing to Jaguar. Sales of the premium carmaker's entry-level model, which costs about $31,000, dropped 43.7 percent in the first two months of this year compared to the same period last year, according to Autodata Corp.
The Starter brand, which Nike acquired last August for $43 million, has a working class image and has been one of the top-selling sneaker brands for Wal-Mart since 2000 when the partnership began.
The old models are still on the shelves here, their white soles gleaming under fluorescent lights. These shoes sell for around $20, roughly the average for sneakers in the deep discount world.
At the head of the aisle are the Nike-engineered Starter sneakers, which sport a sleeker design and a set of pillar-like air bags. At nearly $40, the new shoes - which have been endorsed by NFL quarterback Brett Favre and sport the slogan, "You've got to earn it" - are not even half the price of the top-of-the-line $110 Nike shoe.
But at nearly twice the cost of the sneakers just around the corner, the new Starter shoe is scraping the ceiling of what many penny-pinching customers are willing to pay.
"Price is very important to me because I'm a tight wad," said Pamela Anderson, 50, of Camas, Wash., who bought a pair of the new Starter sneakers for her 17-year-old son this week.
She bought them only after a Wal-Mart manager agreed to slash the price of the shoe in half, after seeing that she was being interviewed for this story.
Revamping a shoe and then offering it at the highest price the market will bear is vintage Nike, said analyst Jamelah Leddy, who tracks the company for Seattle-based McAdams Wright Ragen.
"It's fairly consistent with the Nike image. They're going to be the best in their class regardless of whether they're competing in high-end fashion on Madison Avenue or in Wal-Mart," Leddy said.
Olivet acknowledges that the company is "really pushing it" by offering the shoe at close to $40. According to the market research firm NPD Group, 70 percent of the athletic footwear sold in the United States in 2003 cost less than $45, Nike officials said.
But Olivet said he and others at Nike spent nearly three years studying the discount world and one of the dynamics they discovered is what he calls the "BMW in the Target parking lot" phenomenon.
The demographic that is shopping at Wal-Mart is evolving, he said - a change mirrored in the discount chains' merchandise.
Not everything at Wal-Mart is cheap.
At the Vancouver store, for instance, a 14-carat white gold ring is selling for $589. A 52-inch high definition TV made by RCA is going for $1,586.
That change, said Olivet, signaled to Nike there was room for the company to introduce improved products like the Starter shoe and sell them in the higher bracket.
That said, Nike is adamant that the products it will offer in Wal-Mart - as well as Kmart, Payless ShoeSource, Target and other discounters in coming years - will always be swooshless.
"It's a very funny thing," mused Mary Gleason, the president of the Exeter Brands Group, a Nike subsidiary and Starter's parent company.
"You can buy a Pepsi at the Four Seasons for $4 and you can pay $4 for a Pepsi six-pack at Wal-Mart. But when you cross the aisle and get to something personal, it's very different. You have luxury brands. And you have those brands that only sell in the discount channel," she said.
"The Nike brand just does not belong in the discount channel."
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